When growth stalls: coping with downturn (Proceedings)


A guide to coping with economic downturn.

Veterinary business

     • We have enjoyed a vibrant economy and are often victims of our own success.

     • We never really work "on" the business or we live "in" the business and cannot see our faults or weaknesses.

     • Almost every good company (practice) loses it's way and needs to reinvigorate.


     • The economy is not why your practice is in a stall, it just uncovers what has been hidden by poor management and lack of attention to orderly business.

     • Businesses fail because they run out of cash; we should be flush from the recent economic boom.

     • From "no-lo" to profit or else.


     • Profitability of any business is something that good management can control.

     • Use this time to grow your business infrastructure.

Why do we stall?

     • Lose our position in the market

     • We fail to innovate/management breakdown

     • Abandonment of core principles

     • Loss of talent

1 Loss of market position

     • Defined as the inability of a practice or a profession to respond effectively to new, low-cost competitive challenges or to a significant shift in client valuation of services.

     • Managers/owners become captives of their own success. Strengths become weaknesses in a cruel reversal of fortunes. Pattern of; disdain, denial and rationalization.

Example businesses

     • Kodak

     • Caterpillar

     • American Express

     • Heinz

     • P&G

     • Compaq

     • Phillip Morris

Warning signs

     • Loss of clients/market share

     • Resistance from Key customers of new initiatives/treatments/options

     • Track different metrics to see trends

2 Breakdown of innovation/management

     • We fail to find solutions to rather common problems and rely on past success.

          o Problems with managing operations

          o No systems for updating or improving the practice

          o Failure to create a product or service that is new and different to the client.

     • Warning Signs

     • Forget to spend and budget for facility and equipment improvements.

     • Cutting back on CE and recruiting budgets.

     • No response to low price pressure models.

     • Flat pay progression for employees, loss of career oriented people.

3 Early abandonment of core business

     • We fail to exploit the potential growth in a core business.

          o Belief that our market is saturated when it is not.

          o Viewing operational impediments as a signal to move on instead of trying harder.

          o Failure to understand what the client is really wanting at this point in time.

4 Talent shortfall

     • A lack of leaders and staff with the skills and capabilities required for operations/strategy execution.

     • Fix Internal Skill Gaps

     • Often this is a self inflicted wound

     • Unintended consequence of promoting from within, that allows for accelerated growth when business begins, but these "entrepreneurial" minded employees do not handle change well.

     • Narrow scope of executive talent (DVM's)

     • The bigger the practice gets it is less comfortable with bringing in outside management.

     • Good to always have 10-25% of your influence team members to come from the outside of your practice.

Other contributors to stalls

     • When what you know is no longer so...we don't take the time to investigate WHY something is happening in the practice and we focus too much on the symptom in stead of the cure.

     • Strategic Assumptions are a derivative observations and theories from long ago and they harden into orthodoxy and an inflexible culture.

     • Introspection and self doubt are not at the head of the long list of personality traits that define DVM's.

     • Leadership does not provide a time or a place to thoughtfully reflect on the business.

4 tools to get out of stall

     • Start a "Core Belief" identification squad in your team.

     • Conduct a pre-mortem strategic analysis.

     • Appoint a "shadow" management team.

     • Invite and outsider or "venture capitalist" to your strategic review.

"Core belief" squad

     • Cross functional work group whose purpose is to:

          o Hunt for the practice's most deeply held opinions of itself and the market in which it operates. A reality check.

          o "What industry are we actually in?"

          o "Who are our customers?"

          o "What 10 things would you never hear clients say about our business?"

          o "What are examples of practices that have succeeded by "breaking the rules?"

Premortem strategic analysis

     • Have stakeholders (owners, managers and DVM's) develop competing visions of failure and success and present them to the team.

     • Identify key perceptions and misperceptions.

"Shadow" managers

     • Difficult to do in a practice of less than 10 people but still not impossible.

     • To develop would be management talent or leadership talent give select talent an opportunity to be an "understudy" for a particular role on the team. They can meet a day before the actual team has a meeting and share the same agenda. Compare their outcomes and suggestions to one that the starting team came up with.

Invite and outsider review of your practice

     • Someone from another state with a similar practice size/style?

     • A client perspective on your leadership team?

     • Lunch with the client.

     • Someone from the Chamber of Commerce or another successful medical service business (Dermatologist, Plastic Surgeon, Ophthalmologist).

Red flags for a business stall

     • Core Assumptions about the business environment and about the capabilities needed to maintain our business growth are not written down.

     • We have not revised our list of competitors and market base in several years.

     • We have not researched our working definition of our core market.

     • We are not in tune with shifts in customer valuation of our services.

     • We are less effective than our competitors at translating customer insights into new products and services that delight them.

     • Core clients are increasingly unwilling to pay a premium for our services.

root causes of stalls

     • 87% are directly within managements control

     • 13% are external factors

External factors in a stall

     • Regulatory Actions 7%

     • Economic Downturn 4%

     • Geopolitical Changes 1%

     • Labor Market 1%

Internal stall factors/strategic

     • Loss of Market Position 23%

          o Disruptive competitive prices or value shift

          o Overestimation of consumer goodwill (brand protection)

          o Gross margin captivity

          o Innovation Capacity

          o Missed strategic opportunity

     • Innovation/Management Breakdown 13%

          o Curtailed or inconsistent R & D

          o Slow new product development

          o Inability to set a new standard

          o Conflict with core practice service

          o Over innovation

     • Early Core Product Abandonment 10%

          o Financial diversification

          o Misperceived market saturation

          o Core problems masked by growth

          o Earning growth over core reinvestment

          o Denial of operational impediments

     • Failed acquisition 7%

     • Key client dependency 6%

     • Strategic Diffusion 5%

     • Voluntary Growth Slowdown 6%

Internal stall factors/organizational

     • Talent Shortfall 9%

          o Internal skill gap

          o Narrow experience base

          o Key person dependence

     • Owner/Board Inaction 4%

     • Organization Design 2%

     • Incorrect Performance Metrics 2%

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